I am the editor of Forbes Magazine, and believe strongly that entrepreneurial capitalism and market-based thinking can solve the world's problems. This is my second stint at Forbes -- between 1991 and 1997, I was a reporter, a staff writer (five cover stories), associate editor and Washington bureau chief. In between, I caught the start-up bug: I co-founded P.O.V. Magazine (Adweek's Startup of the Year), and then launched Doubledown Media (Trader Monthly, Dealmaker, Private Air, etc.). As a fattening hobby, I have reviewed restaurants for various magazines since college (and was a National Magazine Award finalist for my wine writing). I used to think chronicling the world's greatest business minds made me a great entrepreneur, but I now realize my time as an entrepreneur made me an acute business journalist. For the full story, check out my book, just out in paperback, The Zeroes: My Misadventures In the Decade Wall Street Went Insane.

Jeremy Lin May Be The Dumbest Harvard Grad Ever

Sorry for the harsh headline, but I’m having a hard time coming up with any other conclusion. While I haven’t checked the Harvard core curriculum lately, it must surely be light on math, psychology and logic, and completely devoid of Marketing 101. How else to explain the self-destructive actions of its most famous basketball alum, Jeremy Lin, who has taken the global phenomenon known as Linsanity and doused it with kerosene.

(Image credit: Getty Images via @daylife)

After last night’s decision by the New York Knicks to let him walk to the Houston Rockets, almost all of the analysis has focused on Knicks owner Jim Dolan. He faced a vexing dilemma, given the back-loaded contract offer from the Houston Rockets that would have forced the Knicks to effectively pay $50 million for Lin’s services three years hence. (My friend Howard Beck of the New York Times provides a useful primer here.) How do you weigh Lin’s basketball and marketing potential against a very small sample set (he’s started all of 25 games in his career) and also against not just what he would be paid, but the larger ramifications of his contract down the line? Given that the adjectives associated with Dolan, backed up a dysfunctional track record, generally include illogical, vindictive, paranoid and dumb (and because I’m a lifelong Knicks fan, I’m being kind), he’s predictably being ripped apart.

In the end, though, I’m more fascinated by the choices Lin made. Dolan will be rich and reviled no matter what he does. Lin may have signed a big contract, but he also just provided the folks at Harvard Business School with a brilliant case study how to cost yourself millions of dollars and scads of influence when you’re not looking at the big picture.

To review, the point guard’s scrub-to-star rise in February – Linsanity! — has arguably been the best sports story of the year, played out on one of the biggest stages, Madison Square Garden. But the NBA’s complicated labor rules forced Lin to shop around his services in order to maximize his next contract with the Knicks. At first, he did so brilliantly, according to numerous reports, originally getting Houston to offer him roughly $5 million for his first two years of his contract (the maximum anyone was allowed), and then a $9 million balloon in the third year, with a team option for a fourth.

Various Knicks sources, including their coach, playing poker as deftly as a late-night drunk at Circus Circus, announced that they would match it, and that was presumably that. A global marketing machine would remain in the global marketing capital, as had been his goal all along, Lin just told Sports Illustrated.

And this where Lin flunked miserably. After the clumsy Knicks showed their hand, Lin and Houston agreed to add another $5 million to his guaranteed salary in third year – a true poison pill, since that extra $5 million would cost the Knicks an extra $20 million or so, courtesy of the NBA’s punitive new luxury tax, atop the effective $30 million bite they had already internalized.

I get why Houston did it. But why did Lin, as an equal party to the new offer, go along? I can only offer two theories:

Financial Certainty: With the revised offer, Lin guaranteed himself an extra $5 million in his pocket, three years from now. That’s serious scratch for a man who had been sleeping on his brother’s couch earlier this year. And given legitimate worries that he was way overperforming during his magical 25 game coming out, taking the sure thing now makes some sense.

But why structure it in a way so punitive to New York? If it was all about certainty, Lin could have instead tried to guarantee that fourth year (or even a fifth year). At $9 million per, that’s way more downside protection, yet spreading it out in a way that didn’t push the Knicks toward the fiscal cliff.

As for the upside, forcing the Knicks to even consider ending his tenure in New York is the truest definition of Linsanity. If Lin is even 80% as good as he showed in flashes last season, fronting a very good, very hyped Knicks team had the potential to bring him tens of millions in endorsements. But as Steve Herz, who cuts celebrity endorsement deals as president of IF Management previously told my colleague Tom Van Riper: “Lin leading the Charlotte Bobcats back to respectability wouldn’t be that interesting. It’s not something that Coca-Cola is going to play $10 million for.”

Insert “Houston Rockets” into that sentence, and you get Lin’s new reality. Rather than the golden boy on an obsessed-over team in the world’s media capital, he’s now an above-average player on a below-average team in a low-profile city.

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Randall: The problem with your line of reasoning is that Lin should have considered it a done deal that the Knicks would offer him a contract. In any business, you NEVER assume that until the contract is actually on the table. (Two bird in the bush vs one in the pocket and all.) Knicks had already told him they would be seeking other PGs including Kidd and Felton, that’s a clear sign that nothing is for sure. Plus, if he turned down the one contract he had offered to him, the Knicks could and WOULD (don’t forget this is a business, please) have offered him a contract that likely would not have even been as good as the initial verbally agreed to contract. Knicks made a ton of money off him last year while paying him less than half their bench-warmers. There’s nothing wrong with Lin seeking what he is worth. It’s not his fault the Knicks have mismanaged salaries to the point of obsolescence.

Jeremy Lin should NOT have signed the Rockets’ offer sheet… I agree. However, where were the Knicks’ offer sheet for him to look at?… it was non existent. So what else was he supposed to do???

At the end of the season The Knicks Organization, Mike Woodson & a few select players were quoted as saying ” Absolutely, we will definitely bring Jeremy Lin back.” — IF so, then why allow him to test the FA market? If they really wanted him and if really did see potential both on and off the court, then they would have NEVER have allowed that to happen.

The Knicks were reportedly going to offer Lin a front loaded contract which by the 3rd year, he would stand to make less than the previous years…. Do that math, in what profession does “ making less money the more years you spend in one place” make sense?

I feel like since the Rockets were ALL-IN on Lin & the Knicks were holding back. You cant tell people that you value them & not have anything to show for it.

They basically pushed him to sign the Rockets’ contract if you ask me.

By asking Lin to garner offers from other teams, the Knicks were attempting to decrease Lin’s bargaining power because they thought no team would offer the type of deal that the Rocket’s offered. Once the Knicks let Lin shop himself, Lin’s dominant strategy is to take the best offer available since he didn’t get an offer from the Knicks, and any matching offer from the Knicks would be the same offer. Any team that offers the best package is doing so with the purpose of signing Lin, meaning restricting the Knicks’ financial position is the offering team’s dominant strategy (AND they wouldn’t offer Lin a contract if they didn’t think they had a legit shot at signing him). What materialized should not have been shocking; it’s the nash equilibrium. The dumbest move was the Knicks not offering Lin a contract before asking him to shop; based on Lin’s personal preference to stay in NY, the Knicks could have gotten Lin for far less money than he got from the Rockets. Clearly, you didn’t take economics in college.

Of course he had control, but there are some things that are more important than playing in NY. Yes, he wanted to play in NY, but if you asked him, I’m sure he’d say that his priority is his family and providing for them. I don’t think you fully grasp what it means to be falling out of the league one moment, and then considered a rising star the next moment. A large part of Lin’s popularity has to do with him being the first Asian-American in the NBA, and while myself and other Asian-Americans will always embrace him for this, the rest of the country will probably find something new to focus on. He knows this. He knows that, like Tim Tebow, the shelf-life on his popularity is not that long. He’s good, but there are a lot of guys that are just as good and aren’t nearly as popular. When the dust settles – and it will settle – he will be relying on his performance to get a new contract and continue to provide for his family. His performance, in turn, relies on his health. And his health is not something that should be gambled with.

Just try and find an NBA player who hasn’t already established a large bankroll that didn’t take the money when it was given to them. Blake Griffin could turned down the Clippers’ extension, and next year, he could have taken a minimum contract to guarantee championships with the Heat. He could even just do a 1 year contract and get his big payday the following year, right? Except that no one does this because THAT is incredibly stupid. One wrong fall and he’ll never get a max contract again; $50M+ down the drain. Think about it.

(One suggestion, and I in no way mean to offend: I think it’d be better if you used correct grammar, punctuation, and spelling, even in your comments. It’s dumb, but I think subconsciously it makes me, the reader, question your credibility as a writer when you don’t. This could just be me, though.)

What is your goal? The assumption here is money. But maybe Jeremy has a different goal. I was actually afraid that Knicks might match it in money, but then keep Lin in bench or with very limited minutes which has to be shared among Kidd, Felton and Lin.

Go have fun in houston, Jeremy, and learn and grow to be a great basketball player! Money and fame will come, if you focus on what your passion is and excel…

The Knicks could have made him an offer, before the Rockets. On June 22nd, Lin and the NBPA won the ruling for his Bird Rights and the Knicks could have made an offer that would have locked him in. Instead, they allowed the other teams to make a play for his services.

The Knicks organization had no cause to be offended for what they allowed to happen.

And the Knicks are in no way complicit by signing Jason Kidd and trading for Felton before ever offering Lin a contract? I think Lin would have been stupid to allow a team that seems to have no interest in him to sign him to a contract. As for Houston, I thought they did a pretty decent job with another Asian star, perhaps you remember Yao Ming?

Randall, your thought does not make sense. When Houston gave him the offer, Knicks kept quiet and rather tried to get other players. That what made him nervous. An offer is an offer and can be cancelled if it has not been signed, so he could not wait forever otherwise he could be jobless again and Knicks could get another freebies.

Now, Houston is also nervous because the contract was still considered match-able by Knicks, so Houston had to pull a maneuver. It is indeed smart move by both Houston and Lin’s team. The problem here is that Knicks was really trying to dumb Lin, that’s what your title is supposed to be.

See this article: http://espn.go.com/blog/truehoop/post/_/id/48018/jeremy-lin-confronts-critics

Seeing as you are one of those critics, what exactly do you have to say about your so-called research? What exactly should have Lin done differently based on an actual narrative of what he did vs the fantasy you spew, the idea that he himself crafted this offer to harm the Knicks bottom-line?